“Far from cleaning up their act, a majority of MEPs seem intent on allowing greed and self-interest to triumph over the proper financial management of public money.

“On today’s performance Europe’s taxpayers could be forgiven for believing that there are more honest people to be found in prison that sit amongst in the European Parliament.

“The MEPs who voted to keep their citizens in the dark about the way taxpayers’ money is used should face a brouhaha in their own countries.”

The £125,000-a-year allowance is supposed to to be used by the 785 Euro politicians to employ secretaries, researchers and aides in Brussels and their constituencies.

But a report into 167 payments earlier this year revealed widespread irregularities.

Mr Davies, who was allowed to see it but take no notes, was so shocked he made public some details.

He is still campaigning for the document, which names no names, to be released claiming some MEPs have been “criminally abusing” taxpayers’ cash.

As well as the ban on putting close relatives on the payroll - voted through by 477-149, the European Parliament in Strasbourg also recommended that the rules for paying-out allowances be tightened.

Both measures were included in its annual review of EU spending.

But they would need to be formally approved and implemented by the Parliament’s administrative arm, which is made up of senior MEPs - and even then would not come into effect before the next European elections in 2009.

The row over employing family members mirrors the case of disgraced ex-Tory MP Derek Conway who hired his son on a taxpayer-funded salary for doing virtually nothing.

Last night Labour MEP Gary Titley, who has always employed his qualified wife Charo as his secretary, said: “The key thing is transparency.

“The important thing is that whoever is employed by MEPs has to be qualified to do the job, and must be seen to do the job.”

Mr Davies said British MEPs were less concerned about employing relatives than some continental MEPs, particularly Germans, for whom the idea was unacceptable.

He said: “In our view, the way you employ family members is more important than the fact of employing them at all.”

Meanwhile, a majority of MEPs also rejected calls for greater transparency into a pension fund, which it is suspected some members top-up using other Parliamentary allowances.